According to Bank of America, the fourth-quarter earnings season is showing signs of a slowdown. While the second week remains positive, the pace lags behind Q3. Around 70% of the 64 reporting companies beat earnings expectations, surpassing the historical average but falling short of the 79% beat rate from the previous quarter. Market reactions to earnings beats are also deteriorating.

Reported earnings have exceeded estimates by 7%, slightly lower than the 8% seen in the prior quarter. BofA anticipates actual growth closer to 11%. Revenue results are also weaker, with 67% of companies surpassing sales estimates compared to 79% in the third quarter. Industrial companies are signaling limited near-term demand improvement. This indicates a potential shift in market momentum.

Market reactions remain a concern, as companies beating both revenue and earnings have underperformed the S&P 500. Guidance has cooled, with fewer companies issuing above-consensus earnings guidance. Over 100 S&P 500 companies are expected to report this week, including Apple, with a focus on AI spending. Investors are closely monitoring these developments.

Excluding financials, the revenue beat rate stands at 73%, approaching the prior quarter's 76%. BofA noted that 2026 revenue estimates have been revised up more than earnings estimates year to date. This suggests that while earnings growth may be slowing, future revenue potential remains a focus for investors. The S&P 500 is the benchmark to watch.